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HANOI: The Transport Ministry issues a circular to increase ceiling airfares for domestic routes from March 1, 2024, after the peak travel period of the Tet (Lunar New Year) holidays.
The increase for routes of less than 500km will be kept the same at 1.6 million dong per one-way ticket and 1.7 million dong for routes serving socioeconomic development.
For routes ranging from 500km to 850km, the ceiling airfare was increased from 2.2 million dong to 2.25 million dong. The ceiling airfare for routes from 850km to 1,000km was increased by 100,000 dong to 2.89 million dong.
The increase for the routes from 1,000km to 1,200km is 200,000 dong to 3.4 million dong per one-way ticket.
For routes of more than 1,200km, the ceiling fare is four million dong, an increase of 250,000 dong.
The ceiling fares include all costs the passenger must pay for airline tickets, excluding value-added tax and airport taxes.
The golden route from Hanoi to Ho Chi Minh City will have the highest fare of 3.4 million dong per one-way ticket and four million dong for Hanoi to Phu Quoc.
Bui Doan Ne, deputy president of the Vietnam Aviation Business Association, said domestic airlines currently offer a range of airfares. However, there are caps on airfares set by the government.
There are no exclusive flight routes on the market, and buyers can easily access domestic air transport services with many options, Ne said, urging consideration of lifting caps on airfares in the long run to ensure market-based pricing.
Rising input costs are weighing on the profits of domestic airlines despite a recovery in revenue after the Covid-19 pandemic, pushing them into financial difficulty.
“Domestic airlines have seen recoveries in revenues, but the sharp increase of input costs undermines their profits, which makes it difficult to recover the accumulated losses incurred during the pandemic,” Ne said.
According to a representative of Vietnam Airlines, jet fuel accounts for about 36% of the transportation costs of carriers.
For 2023, jet fuel prices are projected to be around US$112 per barrel.
The average jet fuel price in 2023 rose by 58.6% against 2015, the year when the existing airfare framework was last set.
Vietnam Airlines estimated that its expenses for jet fuel this year would be 6.2 trillion dong higher than pre-pandemic 2019.
In addition, 70% of payments for operations by airlines are made in foreign currencies, while ticket sales are in Vietnamese dong, which means that the exchange rate between the US dollar and the Vietnamese dong significantly affects profits.
Statistics showed that the exchange rate increased by 9%, from 21,900 dong buying a US dollar in 2015 to 23,900 dong in 2023, creating huge pressure on airfares.
The currencies of major markets of domestic carriers such as Japan and South Korea are also strengthening.
The third-quarter financial report of Vietnam Airlines showed that revenue increased by 32.3% from January to September. However, the carrier estimated a loss of 4.5 trillion dong in 2023.
Vietravel Airlines said exchange rates and fuel prices jumped beyond forecasts and that debt repayment pressures were pushing domestic airlines into financial exhaustion. — Viet Nam News/ANN
